Shawn Drost [01:33]: Thank you Kirti. I’m here with Prasanna. How are you today?
Prasanna Colluru [01:36]: I’m good, thank you, and you?
Shawn Drost [01:38]: Oh, I’m doing good. Thank you for joining me. I appreciate it. I would love to hear a little bit about Future Proof Shipping and your role with the company.
Prasanna Colluru [01:46]: So, Future Proof Shipping offers zero emissions marine transportation services to enable players across the value chain to make the energy transition in the shipping industry.
We are based in Rotterdam in the Netherlands, and our marine transportation services essentially include two main things – being a zero-emissions vessel owner, we are building our own fleet of zero-emissions inland and shore sea vessels which we offer to cargo owners for charter.
Our ultimate goal is to have zero-emissions ocean-going vessels in our fleet, and in the process of building our own fleet, we are gaining a lot of knowledge on zero-emissions technologies and fuels, so we also do some advisory work where we enable others to make this transition by supporting them on technical, financial and commercial aspects as well as project development and management for zero-emissions vessels.
Shawn Drost [02:42]: So, Future Proof owns and operates zero-emissions vessels and also helps others kind of learn how to do the same?
Prasanna Colluru [02:49]: Exactly, ya.
Shawn Drost [02:50]: In your role, what do you do there?
Prasanna Colluru [02:52]: I’m the Director of Corporate Strategy. For us, that essentially means maintaining a strategic overview of alternative fuels that are viable for the industry, zero-emissions technology markets and assessing innovative technologies on their commercial, technical, operational and financial viability to enable holistic decision-making on the choice of technology and solutions to build a zero-emissions vessel.
Shawn Drost [03:21]: Well, it’s a very heady, very interesting space that you are working in. I have a lot of more questions about what you are up to now, but, first I want to connect the dots. How did you come to join Future Proof? What are the parts of your background and interests that led you to this moment?
Prasanna Colluru [03:36]: Well, I began my career in core design and product development in the apparel retail industry in India. I helped set up an entrepreneurial venture for a high-end apparel retailer and along the way I realised that I wanted to work in sustainability because that was really where my heart was.
I moved to the Netherlands to do an MBA which had a focus on sustainability at the Rotterdam School of Management after which I did a couple of internships at energy companies and then went to work for a Dutch innovation and venture studio where also the early research work for Future Proof Shipping was done along with our founder, and I was on the team that did the research and when our founder decided to set up Future Proof Shipping as a standalone company, I moved to work at the company and I’m very grateful to have been given the opportunity.
Shawn Drost [04:31]: So, Future Proof spend out of a… what did you call? A venture firm?
Prasanna Colluru [04:34]: Ya, like they did the initial research. Our founder basically set up the project along with them because he wanted to find something that was sustainable and that could really set an example of doing something in the shipping industry that was ambitious and really focused on zero emissions and not something that was a transitional solution…
Shawn Drost [05:00]: Ya.
Prasanna Colluru [05:01]: … and the initial research was done at this venture studio, and after that Future Proof Shipping was set up as a standalone company after there was some sufficient research on potential pathways to take.
Shawn Drost [05:16]: Ya, so your… your work… the whole company and the founding team is all very oriented around sustainability and that is very essential to the mission of what you are doing…
Prasanna Colluru [05:25]: … yes.
Shawn Drost [05:26]: … and starting story and what drew you there.
Prasanna Colluru [05:29]: Well, I’ve been passionate about sustainability right from like my early career and for me it is really about not improving things or making things slightly better but the ambitious goal of ushering in a zero-emissions shipping world that drew me to the company and the cause, let’s say.
Shawn Drost [05:50]: Ya.
Prasanna Colluru [05:51]: We are really looking at pushing the envelope and not making incremental changes but fundamental changes.
Shawn Drost [05:58]: It’s a very ambitious company, and I understand that Future Proof’s first zero-emissions vessel will be setting sail this year, so that’s very exciting. How does it feel?
Prasanna Colluru [06:07]: Well, it’s a very intense and exciting time for us. Our technical team is right now working round the clock to complete the detailed design engineering and the final leg of the regulatory approval process. The retrofit is currently planned for Q3 of 2021.
So, right now the vessel is… it has an internal combustion engine, and it’s running on MGO which is marine gasoil. During the retrofit, we will remove the internal combustion engine and put in fuel cells, batteries, compressed hydrogen storage and an electromotor, so after that the operations would be fully zero-emissions.
Shawn Drost [06:49]: I want to dig into a little bit more about how does a new kind of ship like this come into existence? I have to assume it’s more expensive to build, the retrofit is more expensive than running on the old fuel, and I would also that… gas that… the fuel is more expensive, is that true? And, like… who is fitting the bill for the additional expenses and why?
Prasanna Colluru [07:10]: Yes, it is expensive when compared to diesel vessel at the moment mostly because given the scale at which zero-emissions technology like fuel cells are manufactured, doesn’t allow at this moment the industry to, let’s say, tap into the advantages of manufacturing at scale and the same is with hydrogen when it is being used as a fuel, but when the production of both the technology and hydrogen scales, we expect the costs to come down significantly as you have seen the cost of solar panels or other renewable energy technologies, for example.
On the funding - our shareholders have invested a significant amount of patient capital because they are keen on seeing an impact and not just return on investment. We have been granted funding through European innovation programmes and have also received Dutch subsidies to help us on this project.
Shawn Drost [08:07]: So, national level and EU-level subsidies, it sounds like?
Prasanna Colluru [08:09]: Yes, yes, both.
Shawn Drost [08:10]: Okay.
Prasanna Colluru [08:11]: And, there is also a premium that would be paid by the cargo owners who would be contracting the vessel to help us close the business case.
Shawn Drost [08:20]: And do they have some particular motive to pay an extra for the greener services or is it just the intrinsic motivation?
Prasanna Colluru [08:27]: Well, they are a company with very ambitious sustainability targets and for them it’s important to make also the emissions on their distribution channel zero, so it’s basically a very forward-thinking project and as they have concrete targets, this is something that will help them along that path and they also would like to eventually decarbonize their entire operations and then distribution and transportation tends to fit into most global supply chains, so it’s an essential thing that needs to be decarbonised.
Shawn Drost [09:09]: Ya, so the customer of the cargo services has an existing decarbonisation plan or mandate or something and they are trying to hit that and so contracting from Future Proof helps them do that.
And I’ve heard that called pledge compliance since this is not exactly like a legal compliance thing. Is there a term for… like that kind of customer motive?
Prasanna Colluru [09:31]: Actually pledge compliance is the first I’ve heard of this, so thank you for this.
Shawn Drost [09:35]: Oh.
Prasanna Colluru [09:36]: But no, we’ve mostly seen that the companies that are most forward-thinking on their sustainability targets are the ones that have let’s say quantified it and have made commitments on a company level…
Shawn Drost [09:48]: Ya.
Prasanna Colluru [09:49]: …and they are not just vague promises to themselves, let’s say where they say “okay, we would like to reduce emissions, but then there are more…” we would like to decarbonise by x%...
Shawn Drost [10:00]: Ya.
Prasanna Colluru [10:01]: … and this should include our operations, so we see a distinct difference between people that have concrete targets versus more vague or things that are still being shaped.
Shawn Drost [10:14]: Right, and was this… do you already know about the customers for the low carbon cargo services? Do you already know about those customers when you were initiating this project? Did you have all that lined up before everything started moving or was it more of a leap of faith where you just believed that the customers would be there and Future Proof initiated the project before you really knew who the customer would be?
Prasanna Colluru [10:39]: It was a bit of both. We started doing our research to understand where really there would be a market for this because when we started the research it was also quite broad-based where we looked into social and environmental aspects and what really could be done in this shipping industry that was really ahead of the game and when we settled on environmental aspects we also tried to understand what does the stakeholder map look like and what’s happening and where… is there scope to actually close the business case for something like this?
We spoke to several people and over the last couple of years we’ve learnt that it is easier to get into a conversation and move towards a concrete outcome with companies that have very significant targets and more concrete targets as opposed to, like I mentioned earlier, targets that are in development.
So, for us it was a learning process and then when somebody that is looking for something like this also hears about the possibilities, they tend to move faster.
Shawn Drost [11:50]: Ya.
Prasanna Colluru [11: 51]: So, it is, let’s say, coming from both sides.
Shawn Drost [11:55]: Ya, and so you mentioned that there were a lot of different pieces of the business case that there was national and EU-level grants, that there was a lot of equity investment in the project and then… of course, the customer paid an increased price for the greener services.
I don’t know how easy this is to communicate in this media, you know, at the time that we have like, can you give us any sense of like how different is this from financing a normal project? Like were the grants kind of small in significance to this, and the increase in price was really the biggest contributor to the different finances? Or, how big were these different parts to the business case?
Prasanna Colluru [12:33]: So, it is financed in such a way that being patient capital reduces the amount we have to spend and so do the subsidies that are coming, but fuel is also like a significant part of this and the premium covers a lot of the cost that is related to the new fuel while the patient capital is mostly… helps reduce the cost of capital as well as the subsidies help reduce the capex itself.
Shawn Drost [13:06]: Ya, okay, okay. Thank you. That clarifies what I was trying to learn about. Wow, very cool. And you mentioned fuels. I wanted to get into that. Can you tell us a little bit about how hydrogen infrastructure connects to this project? So, you are using a new kind of fuel. How is this ship fuelled and how do you develop the infrastructure required to support ships like your new vessel?
Prasanna Colluru [13:31]: So, infrastructure is definitely key to changing the fuel and in shipping I think to fully decarbonise shipping, it’s estimated that over 80% of the investment required would actually be in the line-based supply infrastructure.
Shawn Drost [13:48]: Oh, wow.
Prasanna Colluru [13:49]: This is for the global shipping industry.
Shawn Drost [13:51]: So, you are saying 80% line-based infrastructure, 20% like retrofitting the ships?
Prasanna Colluru [13:56]: Hm....
Shawn Drost [13:57]: That’s incredible. I didn’t know the ratio was like that, wow.
Prasanna Colluru [14:01]: And, if you take the example of the mass which is our inland vessel, we will be using compressed hydrogen containers on board and as there is no, let’s say, refuelling infrastructure available at terminals right now, what we will be doing is swapping containers.
So, when we are at the terminal, we will take out empty hydrogen containers and replace them with full ones and the containers are then taken to a nearby hydrogen production location where they are refilled and brought back to the terminal.
Shawn Drost [14:35]: And these are standard-sized containers that are loaded and unloaded using the same container infrastructure?
Prasanna Colluru [14:41]: They are standard-sized, but they are specialized because they are essentially a frame containing tubes of hydrogen and they are especially reinforced and certified for us to be able to move them on the road as well as put them on the vessel and to be viable for the operations themselves.
Shawn Drost [15:01]: Wow, that’s a very cool way to solve the fuelling problem, and I’m sure I could spend a whole podcast episode nerding out about the details of that but I guess we better not spend a whole podcast episode talking about the fuelling details, but I do want to ask more about the fuelling. You mentioned that you are using high pressure gaseous hydrogen. When it comes to alternative marine fuels, I’ve also seen pilot vessels powered by liquid hydrogen or by ammonia or by batteries or biofuels and on and on in those lot of alternative marine fuels, and it’s kind of dizzying. Of course, the infrastructure challenges get multiplied by however many alternative fuels there are.
So, I want to ask, do you see any emerging winners or losers or are we in an experimentation phase or is it sort of like there’s a niche for everything?
Prasanna Colluru [15:51]: Shipping is actually likely to have a multi-fuel future because there are so many different kinds of vessels that perform so many different kinds of operations, so it’s quite likely that different fuels and technologies would be suitable or be the best options for different segments of the market.
For example, if you consider ferries operating on very short distances within cities, they might easily be able to operate only on batteries. We have battery ferries here in Amsterdam and inland ships could very well work on compressed hydrogen like we have our inland vessel that would be retrofitted that will go from Rotterdam to Belgium and once there are longer routes where typically the energy need is higher and maybe there are not many stops, you would probably need liquid hydrogen or hydrogen that is compressed to a higher pressure.
For our vessel now we are looking at 300 bar and for Future Proof Shipping in general when we say zero emissions, we mean zero greenhouse gas emissions end-to-end, so that’s including NOx emissions, carbon dioxide etc.
So, we typically do not look at combustion engine-based solutions, and we believe electrification is the key because having an electric drive train allows for flexibility in the use of different energy providers where you use batteries or fuels or combination of hydrogen etc.
Shawn Drost [17:25]: Hmm…, and do you see that being true also for ocean going vessels - zero emissions, no combustion processes? I’ve seen a lot of ammonia combustion or other pilot vessels that have some lower level but still not zero emissions.
Prasanna Colluru [17:40]: Well, I think even there for different trades it might be possible that different solutions are picked up. It depends a bit on how technology goes in the coming years, but in case of combustion engines, there are always some emissions, so they are not really zero emission technologies…
Shawn Drost [18:03]: Right.
Prasanna Colluru [18:04]: … and then you would have to have end-of-pipe solutions to clean up whatever emissions there are which may not be the most ideal solution for the long-term.
Shawn Drost [18:15]: Ya.
Prasanna Colluru [18:16]: So, it’s my personal opinion that even if there were combustion solutions, they would be viable only for a short-term when the regulations come into play and people start considering the longevity of their assets because ships are built for 20-25 years – the ocean going ones and inland ships for much longer, sometimes 50-60 years.
So, you don’t want to have a combustion engine vessel for such a long period…
Prasanna Colluru [18:46]: Ya, ya that makes sense. I need to take a break here and just plug the hydrogen class that I’ve been working on with Terra, so for any of our listeners who are specifically interested in the role of hydrogen and in the energy transition in marine and other sectors, I highly encourage you to check out Terra’s class on this topic. It’s called the “Neo Hydrogen Economy” and it starts on January 25, and you can read more – just go to terra.do, and I would love to see you in the classroom, it’s a… it’s a really fun class.
But, I want to zoom out and ask more broadly about decarbonizing ships. How is that going compared to other sectors?
Prasanna Colluru [19:25]: Well, shipping is a large and complex industry, so it’s also difficult to decarbonize and like I mentioned earlier there are many different kinds of vessels carrying out different kinds of trades, operating on different routes, so there have been a lot of efforts in terms of testing new technologies but they have also been slow.
There are some reasons for that that are quite inherent to the industry in that commercial shipping is a low-margin business where a lot of the incentives for installing expensive new technologies on board do not go directly to vessel owners because then the vessel becomes expensive and it becomes less competitive in the market meaning you find it harder to charter that vessel and then it’s also like change in the shipping industry would come much faster when it is driven by cargo owners or shippers in paying customers because they can incentivize zero-emissions vessels through a different mechanism such as maybe paying premiums or offering long-term contracts if they meet sustainability criteria, etc., because then they could pass on whatever extra cost that they incur to their end customers because when you consider the cost of maybe shipping a bottle of wine or a pair of shoes without emissions on an inland route within Europe, it would be just a couple of cents…
Shawn Drost [20:55]: Right.
Prasanna Colluru [20:56]: …and if somebody added 2-3 cents to a product you were buying, you wouldn’t really notice it.
Shawn Drost [21:03]: Right, that’s so interesting. It sounds like kind of a complicated equation but ultimately if the cargo with maybe a little bit more green interest from the people who are purchasing the cargo services, there change could happen a lot quicker. From what you are saying it sounds like a big part of the problem is that the people who are commissioning the ships are responding to a market place where green services are not highly valued yet.
Prasanna Colluru [21:33]: Yes, because once people start looking at sustainability or green vessels as an important criteria to make a decision on which vessel they would choose to ship their cargo on, things will start looking very different because right now the typical mindset is to choose the cheapest vessel…
Shawn Drost [21:52]: Ya.
Prasanna Colluru [21:53]: … and if you look at maybe KPIs of people that are sourcing transport for very large companies might be to reduce the cost of their logistics operation, but ultimately that will not push change in the direction of really sustainable shipping because you would consistently then have to compete with the vessel that’s providing this service at the lowest cost which would be burning probably the dirtiest fuel.
Shawn Drost [22:25]: Wow. Well, switching tracks a little bit, I want to ask about policy and… and where policy fits in. Policy supports have been a part of the… the founding of Future Proof, and I wanted to ask about the future of policies overall in your sector, so both Europe’s COVID green recovery stimulus and Joe Biden’s clean energy plan, they both include a focus on producing hydrogen with renewable energy, and I wanted to ask how do these current events connect to your work and the future of zero emissions vessels in your sector?
Prasanna Colluru [23:03]: The more focus there is politically on decarbonisation in general. There… more focus there will be on decarbonising the shipping industry. In the European green deal now, there is a lot of focus on this and several countries have made carbon-neutrality commitments by different years, but that essentially makes this a very attractive place to be working on zero emissions ship technologies in general, but that said, concrete and ambitious targets are necessary to enable change to happen quickly because the minute we set ambitious targets and the focus shifts from having transitional solutions and spending energy and money on them to really moving to solutions that are really the end goal where you would decarbonise significantly and go to zero emissions and not cut emissions by a few percent.
So, that is something that will really make the industry move faster and then established rules, codes and standards for zero emissions, fuels and technologies can help de-risk them and enable projects to become bankable - meaning ship owners that want to implement these technologies have much wider and easier access to capital than at present.
Shawn Drost [24:26]: Ya, it’s so energising to hear you talk about what’s possible in the world of policy and maybe this is even similar to how politicians or some politicians are talking in the EU. Here in the US it feels like we are steps behind all that.
As grateful as I am for Joe Biden getting elected and a democratic majority in the Senate, you know, even some democratic Senators are saying things like they are shying away from setting numeric targets for green electricity on the grid, you know, like kind of relatively easy stuff…
But, what you are saying just sounds both possible and kind of within reach and it’s just going to add a few cents to each bottle of wine, like that sounds doable.
Prasanna Colluru [25:09]: Yes, it is. A lot if it has to do with perspective…
Shawn Drost [25:13]: Ya.
Prasanna Colluru [25:14]: … and what you are comparing it to, and we cannot compare it to the status quo that hasn’t changed in the last 100 years.
Shawn Drost [25:22]: Ya, it’s the transition that’s going to be a big shift, but we can kind of do it whenever we want. Okay, last question for you, and I’m ending it on a bit of a different note. Are listeners passionate about climate and looking for ways to get more involved? You got the soap box for a moment here, what is your call to action for our listeners?
Prasanna Colluru [25:42]: I would suggest maybe start with small things in general: Repair, reuse, recycle. Consume responsibly. Try to be aware of what you are buying and what you are paying for and then in terms of more career opportunities, I think this is a space where there is a need for people with all kinds of skillsets.
If you are an engineer can you think of a better way to solve the problem related to technology or optimising something and improving it? If you are marketer, can you help climate-positive companies and initiatives tell their story better?
So, try to find a space or industry that excites you and think about how you can make a difference there with your unique skillset and perspective.
Shawn Drost [26:29]: Ya, there’s really a role for everybody. Well, Prasanna, I just really enjoyed talking with you today, and thank you very much for your time and for sharing what you are working on and sharing your knowledge with us. I really appreciate it.
Prasanna Colluru [26:41]: Well, sure, you are welcome. Glad to be here.
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